HoREA proposes to collect deposits for houses and land on paper at no more than 5%

Recently, HoREA sent a document to the National Assembly Standing Committee, the National Assembly Economic Committee and the Ministry of Construction proposing that deposits must be made before signing contracts for the sale and purchase of real estate, housing, and future housing plots, to protect customers and prevent fraud.

According to HoREA, over the years, there have been many cases of "speculators, real estate brokers, dishonest businesses" committing fraud through the trick of receiving "deposits" promising to buy and sell houses, land plots, and future construction works that do not meet the conditions for entering into contracts, typically the case of Alibaba Company establishing a "ghost" project, illegally dividing and selling land plots, receiving "deposits" that are very large compared to the value of the deposited assets and then defrauding, causing damage to customers and also being a cause of instability in the real estate market.

The subjects of "speculators, land brokers, house brokers, dishonest businesses" have taken advantage of the 2014 Law on Real Estate Business which does not stipulate "deposit" before the time when the house, house foundation, construction works formed in the future are eligible to be put into business, to sign contracts and have taken advantage of the provisions in Clause 2, Article 3 and Clause 1, Article 328 of the 2015 Civil Code which allow "individuals and legal entities to establish, exercise, and terminate their civil rights and obligations on the basis of freedom, voluntary commitment and agreement", so the "deposit recipient" has received a "deposit" with a large value of up to 90-95% of the value of the deposited property and then defrauded and appropriated the "deposit" causing damage to the "depositor" in one situation.

First, in case the "deposit" is low but the real estate price increases, the deposit recipient is willing to "cancel the deal" and return the "deposit" (doubled) to the depositor.

Second, in cases where the "deposit" is of large or very large value, the deposit recipient may defraud and appropriate the customer's "deposit".

Third, in case the deposit recipient drags on for a long time, fails to complete legal procedures to implement the project, or intentionally misappropriates capital of customers and investors.

The Association has found that for housing projects and construction works with the purpose of serving accommodation in the future, investors need to receive "deposits" to explore the market and customer tastes; at the same time, customers also need to "deposit" to "finalize" the selling price and enjoy good incentives and discounts for customers who "deposit".

However, point d, clause 4, Article 24 of the Draft Law on Real Estate Business (amended) only stipulates one case of "deposit" which is the investor: "d) Only receive deposits from customers when the house or construction work has met all the conditions for being put into business and has conducted transactions in accordance with the provisions of this Law". This is a provision on "deposit" for the purpose of "ensuring contract performance" after the time the house, house foundation, or construction work formed in the future has met all the conditions for being put into business and has entered into a contract. However, the provision on "deposit" for the purpose of "ensuring contract performance" is correct, but it is not really necessary to re-regulate it in the Law on Real Estate Business because it has been stipulated in clause 1, Article 328 of the Civil Code 2015.

Furthermore, if the contract has been signed, the investor can collect the "first payment" of no more than 30% of the contract value according to the provisions of Clause 1, Article 37 of the Law on Real Estate Business 2014 and Clause 1, Article 26 of the Draft Law on Real Estate Business (amended), so the "deposit" to "guarantee contract performance" at this time is almost never "risky" for the customer and can be completely adjusted according to the provisions of the Civil Code 2015.

According to HoREA, the Draft Law on Real Estate Business (amended) needs to stipulate conditions for receiving "deposits to secure contract signing" suitable for each subject.

Specifically, for real estate project investors, housing and future construction works are only allowed to receive "deposits" after the competent state agency has "approved the investment policy at the same time as the investor" (stipulated in Clause 4, Article 29 of the Investment Law 2020), then the "investor" becomes the "investor" according to the provisions of Clause 2, Article 7 of the Construction Law 2014, amended and supplemented in Clause 4, Article 1 of the Construction Law (amended) 2020, "the investor is an investor approved by a competent state agency" and it is proposed to stipulate that the "deposit" value shall not exceed 5% of the value of the deposited property, which is housing and future construction works.

For the seller of land (divided into lots, plots), the "deposit" is only accepted after the competent state agency has permitted the "plot division" according to the provisions of the law on land and the proposed "deposit" value is not more than 5% of the value of the land.

The Association finds that Clause 7, Article 24 of the Draft Law on Real Estate Business (amended) (Draft 3) has very correct provisions to regulate the deposit behavior made before the time of signing the housing transaction contract and stipulates that "the deposit amount shall not exceed 5% of the value of the house or construction work being sold or leased; the seller or lessor must clearly state in the deposit contract the selling price or lease-purchase price of the house or construction work". But it is very regrettable that this very correct provision has been removed from the Draft Law on Real Estate Business (amended) 4th, 5th, 6th times and the current Draft.

"Therefore, it is necessary to add to the Draft Law on Real Estate Business (amended) a regulation on "deposit" before the time when the house, house foundation, and construction works formed in the future are eligible to be put into business and sign contracts," HoREA proposed.

Wisdom

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